The Present Value of Income to Be Received in Period

question 43

Multiple Choice

The present value of income to be received in period t is given by:

• A)$I_t^*(1 + i)^t.
• B)$I_t/(1 + i)^t.
• C)$I_t.
• D)$I_t/(1 + t)ⁱ.

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Definitions:

Purely Competitive Market

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information, leading to firms being price takers.

Short Run

A time period in which at least one factor of production is fixed, limiting the ability of a firm to adjust its output.

Automatic Market Adjustments

The self-regulating nature of the marketplace that responds to supply and demand changes to reach equilibrium without outside intervention.

Long-run Equilibrium

A state in which, given enough time for all adjustments to be made, there is no incentive for firms to enter or exit an industry, and prices stabilize.